Lester Abbott is aboard an ocean liner that has just docked, carrying diamonds he intends to sell to gem dealer Jules Sparkle. Before he can leave the ship, he is robbed and strangled by ex-con Harry 'Cueball' Lake, who was alerted to Abbott's arrival by two accomplices, Simon Little and Mona Clyde, who work for Sparkle. Little and Clyde have arranged with crooked antiques dealer Percival Priceless to pay Cueball a few thousand dollars and then resell the stolen gems for a fortune, splitting the proceeds three ways.
After meeting with Little—who did not expect Cueball to murder Abbott and tries to back out of the deal—Cueball visits Filthy Flora, madam of the Dripping Dagger Bar. She lets him stay there in a hidden room where he will be safe from police, but she knows he has the diamonds and demands a large payment.
Detectives Dick Tracy and Pat Patton visit Sparkle's establishment to question him. The detectives become suspicious of Little and Clyde. Tracy surreptitiously follows Clyde that evening, and sees her slip a note under the door of Priceless's shop and walk away. After the note disappears under the door, Tracy gains entry and questions Priceless, who claims that Clyde is a customer seeking candlesticks. Unsatisfied, Tracy enlists his friend, the aged thespian Vitamin Flintheart to visit the shop the next day and observe any suspicious activity. Posing as a customer, Flintheart sees Clyde enter and leave, but is unable to overhear her conversation with Priceless, who learns from her that Little (whose intended role in the scheme was to recut the gems) is an unreliable partner.
Priceless goes to Cueball's room to complete the transaction for the diamonds, not realizing that Tracy and Patton are tailing him. Cueball sees the detectives in the bar and becomes enraged. Suspecting Priceless of treachery, he strangles him.
Later, while Cueball is temporarily away, Flora searches his room for the diamonds. She finds and steals them, but Cueball has been watching her through a window. He confronts and strangles her.
Cueball's method of strangling his victims with a braided leather hatband provides the police with a clue to his identity. Hoping to lure him out of hiding, Tracy allows his girlfriend Tess Trueheart to meet with Little and Clyde on the pretense of being a wealthy customer seeking diamonds. Before she can meet them she is kidnapped by Cueball, who discovers her identity and is about to strangle her when Tracy arrives on the scene. During the chase that ensues, Cueball runs onto a railroad track, where he gets his foot stuck under the track and is killed by a speeding locomotive.
